The Lands Protection Act of PEI, IRAC, and Being a Non-Resident of Prince Edward Island: What You Need to Know Before Buying Property on Our Island (Part 1)
Introduction: Understanding the Impact of The Lands Protection Act of PEI
Hello! I'm Marsha Weeks, a REALTOR® with East Coast Realty, and today I’m sharing important information for non-residents considering purchasing property here on Prince Edward Island. Our Island is small in land area, covering just over 1.4 million acres. To put that in perspective, our neighboring province, Nova Scotia, spans around 14.3 million acres.
With PEI’s unique charm and size, purchasing property here comes with specific rules and regulations, notably the Lands Protection Act of PEI. I will provide a general overview of how this might impact your real estate purchase - Let’s dive into what you need to know!
The Lands Protection Act: What You Need to Know
The Lands Protection Act of PEI can be a controversial topic depending on your perspective. As a REALTOR®, I’ll admit it adds extra steps and conditions to contracts, which can sometimes feel like a hassle for clients. However, as an Islander who grew up on a family farm and has a deep appreciation for our vistas, farmland, and beaches, I truly believe in the spirit of this Act.
It’s designed to preserve the integrity and heritage of our Island, protect agricultural land, and safeguard our shorefront. If you’ve visited PEI, you know how special it is.
The Lands Protection Act prevents someone with vast financial resources from coming to PEI and purchasing it entirely. It also ensures that the next generation of Islanders has the opportunity to buy property to live, work, and raise their families.
What is IRAC?
The Island Regulatory and Appeals Commission (IRAC) is a regulatory body that works alongside various stakeholders, including the provincial government. It oversees important areas of PEI life, such as rent control, fuel prices, electricity rates, and, of course, administers the The Lands Protection Act of PEI.
Land Ownership for Non-Residents
As a non-resident, there are limits on how much land you can own in Prince Edward Island. Specifically:
- Up to 5 acres: You can purchase or hold up to 5 acres of land without requiring IRAC approval.
- Example 1: If you’re looking to buy a hobby farm and the listed acreage is 5.25 acres, you must apply to IRAC for approval before purchasing.
- Example 2: If the hobby farm is 4.99 acres, no IRAC approval is needed.
Who is Considered a Non-Resident?
To clarify, a non-resident of Prince Edward Island for real estate purposes is defined as a Canadian citizen or permanent resident who has not maintained their primary residence in PEI for 12 of the last 24 months. In other words, a non-resident is someone who hasn’t filed personal taxes in PEI during that time.
Shorefront Properties and IRAC Approval
These rules also apply to shorefront properties. Non-residents may purchase up to 165 feet of shorefront without needing IRAC approval.
Examples:
- Example 1: You’ve found a waterfront cottage with 100 feet of shorefront and 6 acres of land. You would need IRAC approval because of the acreage.
- Example 2: You’ve found a waterfront cottage with 164 feet of shorefront and 2 acre. No IRAC application is required.
What About Multiple Properties?
If you already own property on the Island and are looking to buy additional land, there are limits on how much you can hold. The combined total of your land holdings cannot exceed 5 acres or 165 feet of shorefront without IRAC approval.
Example: If you already own a cottage with 4 acres of land and a neighboring parcel of 2 acres becomes available, you would need to apply to IRAC for permission to purchase this additional land because your total holdings would exceed the 5-acre limit.
What to Consider When Browsing Properties as a Non-Resident
If you're a non-resident looking to buy property on PEI, here are a few important factors to keep in mind, particularly if the property exceeds 5 acres or 165 feet of shorefront. While you may be open to applying for IRAC approval, it’s important to ensure your purchase aligns with the requirements of the Lands Protection Act.
1. Length of Time the Property Has Been on the Market
One crucial factor is how long the property has been on the market. IRAC regulations require that properties larger than 5 acres (or with more than 165 feet of shorefront) be marketed to Islanders first, before a potential purchase by a non-resident. This ensures that local residents have the opportunity to purchase the property before it’s available to non-residents.
According to IRAC, the property must be marketed to local residents for at least 90 days. If the property has been re-listed multiple times, IRAC may consider the total marketing time across all listings to meet the 90-day threshold.
2. Work with a REALTOR® to Check Marketing HistoryThis is where a REALTOR® can be incredibly helpful. They can research the property’s listing history to determine if it has met the marketing requirements. If the property was relisted multiple times, your REALTOR® can track those listings and confirm whether the marketing time meets the IRAC standard.
3. Making an Offer
If you wish to make an offer as a non-resident on a property that requires IRAC approval, there are a few things to consider. Your REALTOR® will guide you through the process, helping you navigate the IRAC schedule and ensuring your offer includes the necessary clauses to comply with regulations. This ensures your offer aligns with the spirit and intention of the Lands Protection Act of PEI.
How the IRAC Application Process Works
Now, let’s walk through the typical IRAC application process. Usually, the IRAC approval condition is one of the last to satisfy in your real estate contract. This is because the application fee is 1% of the purchase price. Typically, your lawyer will prepare the application on your behalf, so it’s essential to choose a diligent and thorough lawyer to handle this.
With the potential for a sizeable application fee and strict deadlines in your contract, it’s crucial to submit your application on time and with complete information. Your REALTOR® can recommend trusted PEI lawyers who frequently work with non-resident clients.
What’s Involved in the Application?
The application will require detailed information, such as:
- The size of the property
- How long the property has been marketed
- Your motivation behind the purchase (why you’re interested in the property and what you plan to do with it)
- Arable vs Non Arable Land
- Whether the land will be used for development or is currently in the agricultural stream.
- Other factors
Strict Deadlines and IRAC’s Schedule
It’s important to remember that IRAC has strict submission deadlines. If you miss the window, you’ll need to wait for the next available application date. IRAC operates on a set schedule, so timing is critical. Be proactive to avoid delays in your transaction.
What Happens After IRAC Approval?
Once approved, the decision will often come with a condition that reads: "approved with identification." This means the land you purchase cannot be subdivided for 10 years. This restriction is attached to the deed and applies even if you sell the property within that period. The condition is transferred to the new owners as well and it automatically expires after the 10 year period.
If you plan to subdivide the property for future development or resale, be sure to factor this into your long-term plans. Discuss this condition with your lawyer to fully understand its impact.
What If My Application is Declined?
If your IRAC application is declined, you can apply to recover 50% of your application fee. Additionally, your lawyer may be able to appeal the decision or provide additional information that was missing from your original application.
Stay in close communication with your lawyer during this process, as they can help guide you through the next steps to potentially overcome the decision and secure your property.
My Experience with IRAC Approvals
I have had the privilege of helping many clients navigate the IRAC approval process, and I can say that the experience has been overwhelmingly positive. While I wish I could take credit for their success, the truth is that it’s my clients’ genuine commitment to making PEI their home that truly made the difference.
Those who have successfully applied for approval often have plans to live, work, raise families, and contribute in a variety of ways to PEI life. They are teachers, artists, nurses, florists, farmers, welders – and I’m also proud to say that they all settled in well to Island life and are happy with their decision to move here.
While you can certainly be approved for other reasons (like purchasing a vacation property or development land etc), your motivations are also considered in the application process.
I hope this information helps you better understand the IRAC approval process for non-resident real estate purchases in Prince Edward Island. If you're considering making PEI your home, I’d be happy to help you make that dream a reality! Please feel free to reach out with all of our real estate questions!
